Shares in Franchise Brands PLC dropped 23% on Tuesday after the company proposed to buy Hydraulic Authority I Ltd. and fund the transaction through a discounted share placing. At 0910 GMT, shares were down 56.5 pence to 184.5 pence. The multibrand franchise business said late Monday that it had agreed to the acquisition for a consideration of 200 million pounds ($248.3 million) and GBP12.2 million for cash, debt and working capital adjustments.
Hydraulic Authority I Ltd. is the London-based parent company of Pirtek Europe, which specializes in onsite hydraulic hose replacement and associated services. The acquisition is set to be funded by a new bank debt of GBP110 million and equity of GBP110 million or above. This includes the issuance of 10.5 million consideration shares worth up to GBP18.85 million and a subscription with Pirtek Management and employees worth around GBP4.8 million. There is also a share placing of at least GBP90 million at 180 pence a share, which is a 25% discount from Monday’s closing price of 241 pence.
Franchise Brands PLC is a London-based, multibrand franchise business focusing on automotive and home services with franchises in the UK, Ireland, Canada and the USA. The company was founded in 2007 and successfully listed on the London Stock Exchange in 2017. Over the years, Franchise Brands has established an extensive franchise network, currently reaching more than 10 million households, and it continues to develop new and existing franchises.
Elena Vardon is a reporter for The Wall Street Journal, specializing in financial news. She has been covering corporate finance, equity and debt capital markets, mergers and acquisitions, and private equity for four years. Elena is a graduate of the University of Oxford and holds a degree in Economics. Before joining The Wall Street Journal, she worked at Goldman Sachs in London. Elena is a highly experienced reporter and has received numerous awards for her work.